One of the countless pre-election pledges that didn't come to anything was Labour's proposal to give football supporters the chance to buy a 25% stake in their club. Hugh Robertson – then Tory spokesman, now the sports minister – dismissed the idea as a "gimmick". Perhaps he was right, but UK plc isn't the only big organisation that is heavily indebted and suffers from a reliance on a laissez-faire economic model – so is British, particularly English, football. Like the UK economy, English football needs radical restructuring if it is going to survive.

The truth is that while seven of the world's 20 biggest clubs in terms of turnover are English, Premier League clubs are in debt to the tune of over £3.5bn – 56% of the total football club debt in Europe, and four times the debt level of the next most indebted division, Spain's La Liga.

Some people will argue that football is like any other business. But it's not. First, most clubs are still, despite the explosion in player wages and transfer fees, rooted in their local communities. Moreover, the conventional business model doesn't apply when football clubs get up to their eyeballs in debt. Despite the fact that a string of clubs from the Premier League and lower divisions – from Leeds United to Leicester City, Sheffield Wednesday to Southampton – have been either heavily indebted or gone into administration, none have yet been allowed to go bankrupt.

Perhaps this situation was tolerated because none of football's elite have faced financial trouble? But that's not true any longer. Manchester United and Liverpool, Britain's two most successful clubs, have combined debts that exceed £1bn. These huge debts were, like the global financial crisis, caused by a regulation-free approach to football governance. Having both been enormously profitable for decades, both United and Liverpool had their debts loaded on them by hugely leveraged takeovers by American businessmen.

In March the Lib Dem culture spokesman Don Foster called for a radical overhaul of the FA. He's right. England's latest World Cup debacle demonstrated that the FA is dominated by a collection of bumbling committee-men who couldn't pump a football let alone run the game. But the real culprit responsible for English football's lurch towards bankruptcy is the Premier League.

The Premier League consistently defends the debts of its clubs, arguing that since the league makes the most money in the world its clubs can borrow the most. In any economic climate such assertions would be highly questionable. At a time when the capacity to borrow has shrunk drastically, even among companies making sizable profits, it is either utterly naive or unforgivably reckless.

The truth is that the "buy-outs" of Manchester United and Liverpool would never have been allowed to happen if due diligence had been carried out by a responsible governing body. The Glazer family's buy-out of United in 2006 imposed £716m worth of debt on the club, and the annual cost of servicing this debt is £67m. The club supposedly the richest in Britain has spent £325m on debt interest since 2006. Meanwhile, Liverpool's owners are desperately trying to sell the club having found little success in their attempts to restructure its debts through the bond markets.

But there is an alternative, and it doesn't necessarily require government intervention. The German Bundesliga's 50+1 rule ensures that majority shareholders in football clubs are the supporters, with exceptions only when a company has a long standing affiliation with a club – for example, Bayer Leverkusen are wholly owned by pharmaceutical giant Bayer. But this hasn't killed club football in Germany. On the contrary, average attendances are, at 42,000, 20% higher than in the UK, ticket prices are 50% cheaper and five different clubs have won the Bundesliga title in the past 10 years. Meanwhile, their clubs remain successful in Europe, and the national team is always strong. The German model encourages financial stability and massive investment in grassroots football.

We could pursue a similar model in the UK and still have a hugely successful and exciting Premier League. Supporters' protests and demonstrations are not limited to Manchester and Liverpool. Similar problems, on a smaller scale, exist in dozens of English clubs. If supporters are prepared to pay the price of an opera ticket to watch their team for 90 minutes, there is no reason why they won't want to own a substantial portion of their own club.

The tragedy is that Premier League administrators are too weak to challenge their clubs and will continue to sit on their hands. Just as it took the financial crisis to persuade politicians to tighten financial regulation, it will probably take the bankruptcy of Manchester United or Liverpool to do to football what Lehman Brothers' collapse did to the financial sector.